Opportunities and challenges in the debt advice sector

Money Advice Service commissioned a piece of research in spring 2017 on the debt advice sector. A short report was published in July 2017 and these are some highlights.

The debt advice sector in the UK is extremely diverse, with a wide range of approaches and working models. This research revealed many examples of good practice, distributed throughout the debt advice sector – spanning both fee paying and free-to-client services.

It is clear from the research, that one of the sector’s key strengths is kindliness and compassion, regularly combined with high levels of technical knowledge and experience. Clients spoke highly of the understanding and non-judgemental tone of the support they received.

Additionally, across a wide range of providers, large and small, we were shown examples of specific innovations in service delivery – including:

However, despite this progress there were also clear opportunities for improvement:

Advisers regularly described themselves as being under pressure and many felt that they were constrained in how effectively they could support clients.

Advisers could underestimate the recipient’s ability or lack the patience, or time, to encourage independent action. Whilst acting on behalf of recipients might be appropriate in many situations, some worrying cases uncovered during the research suggested that individuals had perhaps lost confidence in their own ability and skills after receiving ‘over-protective’ advice.

Advisers were sometimes also openly jaded and lacked hope for some clients, with some evidence of subtle (or in some cases overt) communication of this ‘fatalistic’ attitude to clients. This introduces the possibility that advice can both help and harm individuals at the same time.

Key insights and opportunities

Greater focus on long-term change
While the sector is primed to tackle immediate financial challenges and deal with ‘crisis’, there seemed to be less focus (if any, in some circumstances) on supporting clients to make longer-term improvements to their financial capability and/or financial situation (beyond benefit maximisation) that would reduce the likelihood of them becoming over-indebted again in the future. Often the focus of advisers was short-term (e.g. getting the right debt solution), missing valuable opportunities to improve outcomes for clients.

More holistic support
Most advisers recognised that there can be a wide range of issues behind someone falling into debt (for example relationship breakdown, job loss, domestic violence and financial abuse, legal issues, mental health difficulties, addiction, unstable housing etc.) These same advisers, however, often didn’t feel it was their responsibility – or feel they had the capability or support – to address wider (non-debt specific) issues. As a result, clients are regularly leaving debt advice with serious issues unresolved – perhaps significantly reducing their chances of improving their financial circumstances or debt repayment prospects into the longer-term.

Better matching need & support offer
The debt sector is diverse in terms of the nature of the support – for example, communication channels, the presence of other types of support (e.g. legal, benefits, employment), tone and manner of advisers, degree of experience in managing complex cases etc. However, the debt advice sector can make assumptions about individual levels of need, for example using ‘vulnerable’ as a catch-all term for all clients and make limited effort to make more nuanced assessments of individual capability. At the same time, for clients the differences between organisations are difficult to understand, resulting in a limited ability to effectively choose services that best fit their individual need.

Greater consistency & continuous improvement
From the research, it was clear that whilst there are many examples of good practice across the industry and debt advice recipients are benefitting from the support on offer, no one provider or approach had the ‘magic formula’. Even for those who had put the most thought into improving the client experience, there was still often a great deal of inconsistency in how well ‘good practice’ was being applied. Many advice providers seemed to struggle with quality control and few showed us any real commitment to continuous improvement or innovation. This was exacerbated by different operating models, for example distributed branch networks seemed to make oversight more difficult and poor ‘client relationship management’ systems (CRM databases) could prevent effective and timely client engagement and make teamwork difficult (e.g. difficulty in handing clients over to colleagues as information was not properly recorded).